CHAPTER 15
Applying Complexity Thinking to Large-Scale Change Initiatives

Projects involving large-scale organizational change that impacts business units across the enterprise, shifts or transforms the organization, involves many business processes and IT systems, and may require groundbreaking commercial practices are inherently complex. Appropriate adaptive and conventional management techniques will help you and your team manage the complexities brought about by large-scale transformative change.

WHAT MAKES LARGE-SCALE CHANGE PROJECTS COMPLEX?

Twenty-first century large-scale organizational change usually involves new technologies, mergers and acquisitions, restructurings, new strategies, cultural transformation, globalization, new partnerships, or new business practices. Handling change well can mean the difference between the success and failure of a project, and consequently, of an organization. Complexities usually center on resistance to change, the unpredictable emotional responses to change, and errors common to organizational change efforts that fail to address team members’ emotional health. In addition, a project that involves the implementation of groundbreaking commercial practices or a new-to-the-world product is rife with many different aspects of complexity.

RESISTANCE TO CHANGE

Large-scale organizational change forces the people within the organization to adjust their behaviors to the changing business environment. Most of us naturally resist change. If we have mastered our current job, we are comfortable with the way things are and we are resentful of imposed change.

Complexity arises when people begin to react to the change in unpredictable ways. Changes to roles, responsibilities, business processes, desktop tools, and IT systems inevitably cause anxiety, concern, tension, and therefore reactions that are likely to be negative and resistant.

EMOTIONAL RESPONSES TO CHANGE

John P. Kotter, the Konosuke Matsushita Professor of Leadership, Emeritus, at Harvard Business School, is perhaps the leading expert on successful organizational transformation. Kotter tells us that peoples’ emotions undermine change. Anger, pride, arrogance, cynicism, exhaustion, insecurity, and anxiety are common human responses to change. These emotions must be acknowledged and dealt with if the change effort is to be successful.

COMMON CHANGE MANAGEMENT MISTAKES

Kotter identifies eight mistakes common to organizational changes efforts, all of which fail to address peoples’ emotional health. These mistakes involve interrelationships, interdependencies, and unintended consequences:¹

• Allowing too much complacency

• Failing to create a sufficiently powerful guiding coalition

• Underestimating the power of vision

• Undercommunicating the vision

• Permitting obstacles to block the new vision

• Failing to create short-term wins

• Declaring victory too soon

• Neglecting to anchor changes firmly in the corporate culture.

The result of these errors is obvious: failure to achieve strategic goals, which often results in a diminished position in the marketplace—not to mention the pain felt by nearly every member of the organization touched by the change.

HOW TO MANAGE LARGE-SCALE CHANGE INITIATIVES

To manage large-scale organizational change initiatives, we suggest the project leader use a proven, research-based change management framework and foster internal motivation to change. For initiatives that involve groundbreaking commercial practices or first-time products, scrupulous industry analysis, prototyping, and a thorough investigation of external constraints may also be required.

CHANGE MANAGEMENT FRAMEWORK

As we have learned, businesses are complex adaptive systems operating within a larger complex adaptive system, the global economy. Organizations must continually adapt to changes in their environment for their very survival. Organizations that handle transformational change well will be the winners; those that simply focus on incremental improvements will be left in their dust.

If your project involves transformational change, you need to look at yourself as much more than a project manager; you must become an expert leader of organizational change. For starters, delve into books by the organizational change experts, such as Kotter’s The Heart of Change. Kotter, who has developed a highly respected research-based approach to successful organizational transformation, contends that “Successful large-scale change is a complex affair that happens in eight stages:”³

1. Create a sense of urgency. After identifying key stakeholders and developing a political management strategy, work with stakeholder groups to reduce complacency, fear, and anger over the change and to increase their sense of urgency.
2. Build the guiding team. Using some of the same techniques as in managing project and organizational politics, build a team of supporters who have the credibility, skills, connections, reputations, and formal authority to provide the necessary leadership for the transformation.
3. Get the vision right. Use the guiding team to develop a clear, simple, compelling vision and a set of strategies to achieve the vision.
4. Communicate for buy-in. Execute a simple, straightforward communication plan using forceful and convincing messages sent through many channels. Use the guiding team to promote the vision whenever possible.
5. Empower action. Use the guiding team to remove barriers to change, including disempowering management styles, outmoded business processes, and inadequate information.
6. Deliver short-term wins. Wins create enthusiasm and momentum. Plan the delivery of short-term wins early and often to gain credibility and positive responses to your project.
7. Don’t let up. Build on the momentum of short-term wins to make wave after wave of change.
8. Make change stick. The goal is to make the change part of the organizational culture—that is, embedded in common behaviors and shared values. This requires consistency of actions over a sufficient period of time for the change to become institutionalized.

INTERNAL MOTIVATION TO CHANGE

Internal motivation to change comes about through a decision based on the merits of the change. In contrast, external motivation to change is created through incentives such as rewards or punishments. Individuals often resist external change, at least until they internalize the motivation based on the benefits they perceive they will realize as a result of the change.⁴

Clearly, then, you should build relationships with the most influential individuals and work to convince them that your project will bring about change that will benefit them. It is often said that we vote for a candidate for office based on emotion rather than the candidate’s policy positions. The same is true of support for change; we welcome change if we internalize emotionally the “goodness” of the change. The 2008 presidential election process provides a timely example. U.S. Senator Barack Obama was able to inspire many Americans to believe that the country needs change based on the merits of the change. By eliciting an emotional response, he drew record crowds of supporters and was likened to a rock star during his primary bid for the Democratic Party candidacy.

GROUNDBREAKING COMMERCIAL PRACTICES

A project that involves the implementation of groundbreaking commercial practices or a new-to-the-world product is rife with many different aspects of complexity. Scrupulous industry analysis is required to develop a new business strategy. Prototyping may be necessary to obtain market feedback. In addition, the external constraints that governmental codes and regulations may impose should be investigated thoroughly.

Conduct Rigorous Industry Analysis

Michael E. Porter, Harvard Business School professor, has developed a framework for analysis when pursuing a revolutionary commercial venture.⁵ Porter’s framework comprises five forces that help assess the competitive environment and thus determine the viability of an endeavor. An analysis of these five forces is also appropriate when a change occurs in any one of them, as this may drive change to an organization’s current commercial practices. Porter’s widely known and used framework consists of the following forces:

• Threat of substitute products, which may lead to buyers switching to competitors if prices increase or satisfaction decreases

• Threat of established rivals, which includes considerations such as the intensity and number of competitors

• Threat of new entrants, which will impact profitability forecasts

• Bargaining power of suppliers, which may lead to exorbitant prices or scarcity of materials

• Bargaining power of customers, which may put the company under pressure to reduce prices or increase quality.

Ideally, this analysis is performed before project launch. Regardless, the project team must continue the analysis throughout the course of the project, keeping a pulse on the competitive environment; potential customers and suppliers; and the influences of government regulations, the media, and the public.

Conduct Prototyping to Obtain Market Feedback

If the product is truly new, market data may be nonexistent or unreliable. Rapid prototyping will therefore be necessary to obtain market feedback. This situation calls for late requirements freeze. Product definition will occur iteratively, based on intuition and trial and error. In addition, creating market demand for a groundbreaking new product may require extensive customer education.⁶

Investigate Commercial Practices Rules and Regulations

Compliance with governmental codes and regulations often poses significant constraints when embarking on groundbreaking commercial practices. Concerns include patents, intellectual property issues, and codes and regulations set by local, state, federal, and international governments. Governments issue directives and establish regulations for many reasons:

• To enhance consumer rights

• To protect consumer health and safety

• To prevent exploitation of vulnerable consumers, e.g., children

• To make it easier for business to carry out global transactions

• To outlaw unwanted practices, e.g., misleading and aggressive marketing.

Commercial practice rules are usually regulated by government agencies. Examples of regulations include the Code of Federal Regulations, Title 16: Commercial Practices, and the Government Accountability Office’s Leading Commercial Practices for Outsourcing of IT Services. The rules and regulations are enforced by national consumer protection authorities and the courts, such as the U.S. Federal Trade Commission and the Consumer Product Safety Commission.

Before embarking on a project to develop new commercial practices or products, be sure to perform the appropriate due diligence by carefully and thoroughly examining and assessing the commercial environment and regulatory constraints. The goal should be to alleviate unknowns, risks, and dependencies prior to launching the new commercial effort.

TABLE 15-1. Approaches for Managing Large-Scale Changes Initiatives

NOTES

1. John P. Kotter, Leading Change (Boston: Harvard Business School Press, 1996), 4-16.

2. Unmesh Kher, “The Segway Riddle,” Time, August 14, 2006. Online at http://www.time.com/time/business/article/0,8599,1226309,00.html (accessed March 2008).

3. John P. Kotter, The Heart of Change (Boston: Harvard Business School Press, 2002), 33-158.

4. B. Michael Aucoin, Right-Brain Project Management: A Complementary Approach (Vienna, VA: Management Concepts, 2007), 76-77.

5. M.E. Porter, “How Competitive Forces Shape Strategy,” Harvard Business Review, March/April 1979.

6. Peter W. G. Morris and Jeffrey K. Pinto, The Wiley Guide to Managing Projects (Hoboken, NJ: John Wiley & Sons, Inc., 2004), 11.